LED ROI – Assessment Metrics with Lumens Per Dollar Over Warrantied Life

By Charlie Szoradi | Independence LED Lighting 

To date, Return on Investment (ROI) has been a guiding force in the adoption of commercial LED technology. If a $100 fixture saves $33 each year, the ROI is naturally 33 percent. If the LED fixtures earn a utility rebate that is either based on a prescriptive amount like $25 or a performance amount on the reduces annual kilowatt hours, the net hardware cost could come done to $75. Given that the installation labor may come in around $25 per fixture, the rebate often offsets a major portion of the installation, holding the ROI in this example to 33 percent, or a 3 year payback. Paybacks in three years or less are favorable, especially since the LED fixture may last for a decade. The rebates are a key aspect of the ROI, and many utility companies use the DesignLights Consortium (DLC) for their Qualified Products List (QPL) to determine eligibility on a fixture by fixture basis.

ROI is a very valuable assessment metric, but it does not address long term value when comparing one or more LED fixture to other options. Light output, measured in lumens, has been a performance metric in the lighting market relative to power consumption, measured in watts. The lighting industry has largely used lumens per watt (lm/w) as a guiding metric to determine fixture value. Lm/w is similar to miles per gallon (mpg) for vehicles, but it does not take into account cost. When buyers consider purchasing a car, the fuel efficiency is typically relevant, but mpg is only part of the decision relative to the total cost, features, and warranty on the vehicle. Lumens per dollar is a way to link the output of the light to the cost, and lumens per dollar over the warrantied life is a guide to determine lifecycle value and Total Cost of Ownership (TCO).

Lm/$ over LED life and TCO are strong sibling metrics in addition to ROI. You could have an ROI “winner” for fixture “A” that is a lower cost LED fixture, but if it has lower lm/w and a shorter warranty than other options “B” or “C”, it will actually cost more over time to operate and maintain. Think of LED fixtures as energy tools vs product commodities in assessing a new purchase.

Steps for Energy Intelligent Assessment of LED fixtures:

  1. Open a spread sheet
  2. Get the Specification Sheets for the LED fixtures that you are reviewing
  3. Use the spread sheet rows for each LED light
  4. Use the spread sheet columns as follows to enter the data (from left to right):
    A: Manufacturer Name, B: Product Number, C: Lumens Output, D: Watts, E: Warranty in Years, F: Product Cost
  5. Run the calculations in additional columns for each LED light:
    G: Lumens/Watt, H: Lumens/Dollar, I: Lumens/Warranties Life, J: Lumen/Dollar over Warrantied Life

Given equal aesthetic appeal, functionality, installation cost, the winner should be easily apparent in the column with Lumen / Dollar over Warrantied Life.

Top Tip on ROI and Assessment Metrics
Look for LED products that have the highest lumens per dollar over the warrantied life.

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ILL_Charlie-SzoradAbout the Author
Charlie Szoradi is the Chairman and CEO of Independence LED Lighting, an award-winning US LED Manufacturer. He has taken a leadership role in sustainability and lighting for more than 20 years, dating back to his Master’s Thesis at the University of Pennsylvania on “Energy Intelligence” in 1993. He has multiple patents and is a sought after speaker for both industry and academic events. Szoradi is available by e-mail at Charlie@IndependenceLED.com.